I notice that many times the overnite direction is opposite the daytime session direction. I am interested in finding out if this a random event or if there is a rational explanation. Do the trades always have hedgers on one side rather than both sides of the trade being speculators? Could overnite price movements trigger automated stop losses or buy/sell orders?
I've found that some of the overnight counter trend position has to with option traders needing to hedge prior to the start of the next day. Most pit traders who trade options try to trade with delta neutral arbitrage strategies. If i buy a 50 lot of calls on the close with a delta of .5 i will have to sell 25 futures to be delta neutral going into tomorrow's open. Presuming i bought the calls on a closing rally i have to sell in the overnight to hedge. Less play in the overnight so to get filled on my 25 lot i'm going to have to pay more ticks than i'd like. As far as the correlation goes i think it would be an interesting study. To be fair I don't know what percentage of the trades in the overnight have anything to do with floor traders hedging for the next open. It could be a rather small percent but I would argue it is at least some of the action.
Caroy, Believe that explains for part of that action. The overnight action could at times be partly affected by the actions in the DCE (Dalian Commodity exchange). There are a couple of firms out there doing spreads between DCE and chicago.
Do you know of any US futures firms who can offer electronic trading on the Dhalia corn contracts? I'd be interested.